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LTC Bullet:

Is Medicaid Planning Ethical?

Tuesday October 26, 1999


In Sunday's New York Times Magazine (10/24/99), Randy Cohen's "The Ethicist" column addressed the ethics of Medicaid planning, i.e., the practice of transferring or sheltering assets in order to qualify for Medicaid's long-term care benefits. Below is the question posed to Mr. Cohen by an anonymous "G.O." and excerpts from Mr. Cohen's answer with the Center's commentary following each excerpt.

"Be Medicareful"

Q: "My mother has Alzheimer's disease and her doctor has warned me that she soon will need to be placed in a nursing home. Several years ago, her lawyer advised me to transfer her assets to my name so that she could qualify for Medicaid and I could inherit her money. This is perfectly legal, and according to other people in the same situation I've spoken to, it is widely done. But is it ethical? --G.O."

A: "Perhaps it is calling this 'transferring assets' that gives it a sinister tone; if you think of it as a mother offering her child a gift, albeit one you enact on her behalf, it couldn't be more ordinary or more benign."

CLTCF: G.O.'s question makes no mention of intent on the part of G.O.'s mother to make any gift whatsoever. How does Mr. Cohen know that G.O.'s mother wouldn't prefer to spend her money on her own care rather than transfer it to G.O? Moreover, G.O.'s relegating his mother to Medicaid-financed nursing home care is hardly "benign." Medicaid suffers from a notorious reputation for problems with access, quality, discrimination, reimbursement, and institutional bias. Sadly, adult children all over the country are being prodded by Medicaid planners to "help" their parents plan for long-term care by transferring assets to qualify for Medicaid. As G.O. mentions, a major selling point is the opportunity to receive an early inheritance created by the asset transfers which effectively shift the burden of paying for a parent's care onto taxpayers and onto nursing homes which often receive less than the cost of care from Medicaid. As in this case (G.O.'s mother has Alzheimer's), the parent in question may already be unable to contribute meaningfully to the decision. In fact, the lure of an early inheritance is hard for many adult children to resist, especially when it can be justified on the basis that mom or dad is already "out of it" and won't know the difference. This situation presents an obvious conflict of interest that any "ethicist" should recognize.


A: "For your mother to do so deprives no one else of healthcare. Federal and state governments finance Medicaid for all who are eligible"

CLTCF: The reality is far different. One of the darkest repercussions of Medicaid planning is that truly poor people, those for whom Medicaid was originally intended, are sometimes shut out of the better nursing homes nearby because of a limited supply of Medicaid-certified beds. They may have to accept care far away or be placed onto waiting lists for months or even years. How does this happen? Medicaid planners advise clients to hold back enough money to enter a preferred nursing home as a private payer. Nursing homes always have space for private payers who are needed to offset low Medicaid reimbursement rates. After a few months, the Medicaid planner's client conveniently runs out of money and becomes Medicaid eligible. The result? A senior who artificially impoverishes himself or herself to qualify for Medicaid takes a bed away from a truly poor senior who can't afford such legal maneuvering.


A: "You might consider long-term care insurance, which can allow your mother to preserve her savings."

CLTCF: Long-term care insurance is an excellent way to secure top-quality care at the appropriate level. Unfortunately, G.O.'s mother already has Alzheimer's and would not qualify. Long-term care insurance lets you to trade the risk of a catastrophic loss for the certainty of an affordable premium. A key point is that there must be a risk to insure against. Just as you cannot buy fire insurance when you smell smoke, you cannot buy long-term care insurance when you already need care. While it's too late for G.O.'s mother, G.O.'s situation should be a wake-up call to plan ahead so that G.O.'s children are not burdened by the same unfortunate dilemma G.O. now faces.

Everyone draws his or her "ethical line" differently. While many view Medicaid planning as abhorrent in all cases, others are quick to make exceptions or even justify the practice without reservation. The key is to focus on the real-world consequences of the various choices.

Ideally, public policy would include the necessary incentives for people to plan ahead and secure their long term care before they actually need it. Today, a person's ability to do nothing and then shift the cost to taxpayers with the help of a Medicaid planner undermines what little progress has been made to promote responsible behavior. Until lawmakers confront and resolve this problem, any debate over the ethics of Medicaid planning will be dwarfed in significance by Medicaid planning's resoundingly negative consequences.

Source: Randy Cohen, "Be Medicareful," New York Times Magazine, October 24, 1999, p. 36.